25th Mar 2020 08:36
(Alliance News) - Pest control firm Rentokil Initial PLC on Wednesday withdrew its final dividend and full-year guidance due to the "unprecedented uncertainty" caused by the Covid-19 outbreak.
Shares in the company were 9.5% lower at 335.20 pence each, while the wider FTSE 100 index was up 2.6%, on Wednesday morning in London.
The company said that it was only in the last ten days that its trading has been hampered by the virus. Until mid-March, its performance "was not materially impacted".
Rentokil explained: "Within the last ten days, however, the impact on our global businesses has significantly increased. Covid-19 has affected the majority of the key countries in our group with many markets in advanced stages of lockdown. The impact of the virus on our businesses to date has been varied, dependent on factors including the rate at which the virus has spread, individual government response and required levels of customer service.
"In this period of unprecedented uncertainty we are consequently withdrawing our previous guidance for 2020. We will update the market on our first quarter trading performance and further on the potential impact of the coronavirus on April 16."
Rentokil reported mixed demand for its products and services. With hotels, restaurants and catering sectors being forced to close due to government lockdown measures, demand has fallen, though it has been "strong" in hygiene services and food production markets.
With the FTSE 100 firm looking to save cash due to the virus outbreak, it has withdrawn its final dividend of 3.64p and suspended all further payouts "for the time being".
It has also drawn down a revolving credit facility, giving it a cash balance of over GBP650 million. The figure excludes any funding from the UK government, Rentokil noted.
The company added: "Pay cuts have been made across the board and all senior management grades, with bonus schemes cancelled and the 2020 long-term incentive plan grant postponed. Reductions in other employment costs are being evaluated."
Rentokil has also frozen all hiring, scaled back marketing spend and stopped all travel, entertainment, meeting and external training.
Its cost-cutting measures will save GBP100 million in 2020, the company explained.
In addition, capital expenditure for the year will be reduced by GBP75 million.
By Eric Cunha; [email protected]
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